Welfare Reform Bill

(4) Eligibility for (a)the standard allowance, (b) the amount for responsibility for children or (d) the amount for other particular needs or circumstances in section (3) will entitle the claimant

(a) to (c) an amount for housing which will not reduce (a), (b) or (d) with the payment of rent.

(b) to an amount for council tax which will not reduce (a), (b) or (d) with the payment of council tax.

Brief

The move from RPI to CPI slows down the rate of increases on all welfare while the prices of food, fuel and other necessities are increasing faster than either the RPI or the CPI , so worsening poverty. Letter below from Donald Hirsch describes the problem.

Therefore it is essential that inadequate LHA/housing benefits in the UC, Clause 1 (3) (c), and the level of the AMHB, do not leave rent to be paid out of the balance of the UC provided by Clause 1 (3) (a) (b) & (d). For many years HB and CT were paid at 100% to people receiving income support out of which rent and council tax never had to be paid. Currently all IS/ESA/JSA + children’s allowances are below the 60% of the AHC median threshold and about 60% of the Joseph Rowntree Foundation minimum income standard.

There is a public health issue raised here. The Government Office for Science published "Mental Capital and Wellbeing" in 2008 which related debt to mental health problems; but the public health white paper has no mention whatever of the word "debt".

The same is true for council tax which is where the clash with DCLG comes in. LOCAL authorities have no idea at the moment how council tax benefit is going to work.

Letter from Head of Income Studies, Centre for Research in Social Policy, Loughborough University

Dear Paul,

Both in Minimum Income Standards (MIS) and in the London Living Wage calculations, annual upratings take account of the average rise in food prices in the RPI, but do not specifically look at individual items such as fish. If fish goes up in price faster than the index, but some other items that are in our basket go up more slowly than the index, this will average out.

Where the price of certain healthy foods (including fresh fruit and vegetables) are going up particularly fast, I think this is relevant not so much for the overall cost of the budget but for the pressures that this puts on families to switch spending to less healthy but cheaper options.

A respondent in one of our surveys whose debts were putting severe strain on basic food spending said she goes for offers such as one she saw recently where she bought 40 sausages for 89p. Our evidence suggests that it's these sorts of choices that will be the biggest link between rising food prices and insufficient diets among those on the lowest incomes.

Incidentally, you'll be interested to know that I have made a new projection that considers what the relationship between the cost of living and Income Support (IS)/Job Seekers Allowance (JSA) rates might be in 2020 if recent rises in the cost of food and domestic fuel were to continue, influenced by ongoing global pressures on commodity prices.

My calculations are for April 2010-April 2020. They imagine the following scenario:

- Food prices rise as fast as they have been doing on average over the past 4 years (when they started to take off)

- Domestic fuel prices rise at the same rate as the rise in the price of gas over the past decade

- Other elements of CPI rise in line with the government's target of 2%

- IS/JSA is uprated only in line with the CPI index

This produces the following results in April 2020;

- IS/JSA £93 for over 25s and £74 for under 25s

- Minimum food basket costs £77

- Fuel costs £24

I should emphasise that these figures are illustrative and not forecasts, but they illustrate the following key points that you might want to use:

- If food inflation continues at its present rate, the TOTAL disposable income of a single person under 25 on benefits will become insufficient to meet even their food needs some time in the present decade, unless benefits are raised.

- If food and fuel inflation continue at their present rate, the TOTAL disposable income of a single person over 25 on benefits will be insufficient for that person just to eat properly and keep warm, even if not spending any money on anything else, unless benefits are raised.

- In these ways, ABSOLUTE poverty is set to grow substantially as a result of the present combination of inflation and uprating trends.